Indian banks, including major players like HDFC Bank and ICICI Bank, are strategically leveraging the Reserve Bank of India's (RBI) special deposit and swap programs to enhance their net interest margins. These initiatives, announced in June 2026, primarily involve attracting foreign currency non-resident (FCNR) deposits and facilitating external commercial borrowings (ECBs) and overseas foreign currency bonds (OFCBs). The RBI's zero-cost foreign exchange swap facility for FCNR(B) deposits and concessional swaps for ECBs significantly reduce hedging costs for banks, allowing them to offer more attractive rates to depositors and borrowers. For instance, banks are currently offering rates as high as 7.5% on USD FCNR(B) deposits, a substantial increase from the prior 3-4% range.
Economists and bankers project these programs could draw between $80 billion and $85 billion in foreign capital. Early momentum is primarily from FCNR(B) deposits, which have already seen an estimated $10 billion in inflows since June 2026. ICICI Bank, for example, is planning its first benchmark dollar bond sale in nearly nine years, aiming to raise at least $500 million, following HDFC Bank's successful $750 million debt sale. Axis Bank has also issued an $800 million dual-tranche dollar bond.
Apart from boosting banks' margins, the inflow of foreign capital is crucial for supporting the Indian rupee, which has faced pressure amid global economic turmoil, and for bolstering India's foreign exchange reserves and balance of payments. The FCNR(B) facility is open until September 30, 2026, while the ECB and OFCB schemes extend to December 31, 2026. The RBI and finance ministry are closely monitoring progress and encouraging banks to intensify their outreach to non-resident Indians (NRIs) across various geographies, including Singapore, Hong Kong, the US, and the UK. The current drive is being compared to a similar program in 2013 that mobilized approximately $34 billion.
